The agreement, announced by the New York attorney general, Eric Schneiderman, follows the £290m fine imposed on Barclays four years ago from UK regulators – and others such as the US Department of Justice – for manipulating the benchmark interest rate.
Barclays is the first of several banks involved in setting the US dollar Libor to resolve investigations with attorney generals across the US. Seven states are not involved in this latest agreement.
Schneiderman said government entities and not-for-profit organisations were defrauded of funds because they did not know Barclays and other financial firms were manipulating the rate, which is used to price an estimated $350tn of financial products.
“There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes big banks and other financial institutions that engage in fraud or impair the fair functioning of financial markets,” said Schneiderman. “As a result of Barclays’s misconduct, government entities and not-for-profits were defrauded of funds that otherwise could have been used to benefit the people of New York.”
The settlement agreement (pdf) included details of emails and conversations between Barclays staff about making changes to the Libor rate during two periods: during the financial crisis when the bank tried to reduce its rate to avoid the idea it was in trouble, and later to benefit the positions of traders.
Barclays said it was pleased to have resolved the investigation. “We believe this settlement is in the best interests of our shareholders and clients, and allows us to continue to focus on the future and serve our clients,” the bank said.
The way Libor is calculated has been changed since the scandal, but at the time, it was set by a panel of banks making submissions about the rate they thought they would be asked to pay to borrow from rival banks over different time frames.
In one exchange in December 2007, a Barclays employee involved in submitting rates told his supervisor: “At the same time that we were setting at 5.30% I was paying 5.40% ... in the market. Given a free hand I would have set at around 5.45% ... My worry is that we [both Barclays and the contributor bank panel] are being seen to be contributing patently false rates. We are therefore being dishonest by definition and are at risk of damaging our reputation in the market and with the regulators.”
The settlement is with 43 US states and the District of Columbia.
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